Installed Building Products, Inc. Q2 FY2025 earnings call

• IBP continues to deliver strong financial results, emphasizing high-value installation services for homebuilding customers. - Confident in long-term U.S. housing industry fundamentals and growth-focused capital allocation strategy. - Focused on growing earnings and cash flow through geographic expansion and end product/diversification. - Paid nearly $68 million in cash dividends and repurchased approximately $84 million of common stock in the first half of 2025. - Second quarter sales: Consolidated up 3%, same-branch up 1%; multifamily starts saw double-digit growth, commercial sales in Installation segment up 9% YOY on same-branch basis. - Cash flow from operating activities up 11% to $182 million, driven by working capital management. - Acquisitions slowed but remain disciplined in finding well-run businesses.

Consolidated sales increased 3% and same-branch sales grew 1% in the second quarter. In the Installation segment, same-branch new single-family installation sales were roughly flat compared to a nearly 10% decline in U.S. single-family completions. Multifamily end market backlogs at key branches showed year-over-year growth, and second quarter commercial sales in the Installation segment increased 9% from the prior year period on a same-branch basis. Cash flow from operating activities increased 11% to $182 million during the 6 months ended June 30, 2025, primarily due to effective working capital management.

• Expect third quarter 2025 amortization expense of approximately $10 million and full year 2025 expense of approximately $40 million. - Expect effective tax rate of 25% to 27% for full year ending December 31, 2025. - Strong liquidity position with ~$417 million available under stock repurchase program. - Third quarter dividend of $0.37 per share, a 6% increase over prior year period.

• Housing affordability remains a challenge in the near term. - Macroeconomic uncertainty influencing market conditions. - Potential impact of tariffs on costs, expected to be ~$5 million in fourth quarter 2025. - Light commercial end market continues to be weaker than expected. - Challenges in Florida market share despite large presence.

Q: Could you provide more detail on customer and product mix improvement, especially regarding end markets and customer changes?

A: Michael Thomas Miller noted better relative performance from regional and local builders than large national public builders, improvement due to weather issues being worked through, and solid growth in complementary products with 100 basis points gross margin improvement.

Q: What's the attribution for complementary product margin improvement?

A: Michael Thomas Miller said it was fairly even across products, with efforts to improve margins, and CQ's excellent work in increasing complementary product penetration in multifamily at acceptable margins.

Q: How do you see single-family and multifamily volumes trending, and what drove outperformance in 2Q?

A: Michael Thomas Miller mentioned single-family starts year-to-date down 7%, with regional and local builders showing mid-to-high single-digit growth in states like Carolinas, Virginia, etc., and Florida being a notable exception. Outside of execution, weather and timing issues, and complementary growth vs installation growth contributed.

Q: Can you talk about the pipeline of acquisitions and ability to hit $100-plus million target?

A: Jeff Edwards stated pace of closing deals has slowed, but there's a pipeline of bolt-on deals and potential for larger acquisitions in core competency groupings and other verticals.

Q: What about heavy commercial and light commercial?

A: Michael Thomas Miller said heavy commercial is strong, offsetting light commercial weakness which continues to be weaker than expected through 2025.

Q: When will multifamily trend start to hit results?

A: Michael Thomas Miller thinks it's more of a 2026 story, possibly into second or third quarter, but encouraged by bidding activity and CQ's cross-selling of complementary products.

Q: How sustainable are market share gains in outperforming geographies?

A: Michael Thomas Miller said it's difficult to say, but challenges persist in second half, though the team is expected to manage effectively.

Q: Talk about gross margins vs long-term targets and spread between publics and regionals.

A: Michael Thomas Miller noted regional and local builders have higher gross margin but higher cost to serve reflected in SG&A, with selling expense in line, G&A higher due to variable compensation from strong EBITDA.